In this month's issue:
The Job Market Provides Ballast for the Economy
Mark Luschini, Chief Investment Strategist
We have noted on many occasions that a healthy labor market is key to sustaining economic vitality. Therefore, if one were to offer a prognostication about the outlook for economic growth over the next several quarters or more, it would likely include a litmus test of employment conditions. After all, consumer spending accounts for nearly 70% of domestic economic activity, and one’s propensity to make the usual purchases of goods and services would likely diminish if jobs were being jeopardized or lost by frail or weakening activity.
Recent employment data suggests that, despite less-than-uniform good news, there is evidence to show that not only is the job market sturdy, but there is also a chance it is poised to improve looking forward. To be sure, the payroll report released by the Bureau of Labor Statistics that showed a net loss of 23,000 jobs in July was certainly disappointing. Not only was the number stunningly low, but it was accompanied by a sizeable downward revision to the previous two months. That lowered the average monthly gain for the last three months to just 20,000.
Treasury Issuance and Buybacks
Guy LeBas, Chief Fixed Income Strategist
The process by which the U.S. Treasury Department sells bills, notes, and bonds every month to fund the U.S.’s budget deficit used to be boring. Once a quarter, the Treasury would estimate how much cash it needed to raise (it still does), consult with industry professionals (a group called TBAC), announce its auction amounts (which has become a market event), and plug any holes with T-bills during the quarter (cash management operations). A key tenet of this process was that Treasury issuance was supposed to be regular, predictable, and intentionally boring—not subject to shorter-term market decisions. But as the Treasury market has outgrown the infrastructure supporting its trading, this process has grown more complex.
In 2024, the Janet Yellen Treasury introduced buybacks, through which the Treasury would regularly purchase aged and illiquid outstanding instruments and effectively replace them with “fresh” ones that were ostensibly easier to trade. While there was plenty of criticism about market manipulation at the time, the program’s stated goal was to smooth trading flows in the Treasury markets. The total dollar amount of these buybacks was about $75 billion per year, which sounds like a lot, but is a drop in the bucket compared to trillions of dollars of bonds the government refinances and sells anew. Then, in August 2026, the Scott Bessent Treasury doubled down on this policy and announced a series of accelerated buybacks in the fall of this year—approximately double the prior pace.
The Final Third Begins
Gregory M. Drahuschak, Market Strategist
Despite a periodically tumultuous two-thirds of 2026, many investors may be willing to accept the equity market’s year-to-date result and call an end to the sixth year of the decade. After the market’s substantial advance higher from its March 30, 2026, low, this becomes especially appealing as we enter what historically has been the weakest month of the year for stocks, following a five-month advance without a consequential pullback. While that might be tempting, locking in gains now could mean missing another leg of the bull market.
Concerns about September are supported, at least in part, by more than six decades of market history. The S&P 500 posted an average 0.66% loss over the past 76 Septembers and ended lower in nine of the previous 19 midterm election years.
You can read the full Investment Perspectives here.
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